Title: Business cycles in Bulgaria and the Baltic countries: an RBC approach

Authors: Aleksandar Zdravkov Vasilev

Addresses: University of Glasgow, Adam Smith Building, Glasgow G12 8RT, UK

Abstract: This paper explores the business cycle in Bulgaria and the Baltic countries: Estonia, Latvia and Lithuania during the 1993-2005 period. The paper aims at deepening the understanding of the nature of output fluctuations. The neoclassical approach will be employed, much in the spirit of the real business cycle (RBC) literature, which gives a general equilibrium picture of the transition process. The model used in this paper follows the methodology of King et al. (1988). Both the model and data series show that the major drop in output was due to productivity. In addition, the timing of the banking reforms coincides with the improvement of economic performance. This is a strong indication that banking regulations in place were crucial for the output performance throughout the period in Bulgaria and the Baltic countries, a finding that has important implications for economic policy.

Keywords: business cycles; productivity; Baltic countries; Bulgaria; Estonia; Latvia; Lithuania; output fluctuations; real business cycle; RBC; banking reforms; economic performance; banking regulations; economic policy.

DOI: 10.1504/IJCEE.2009.029256

International Journal of Computational Economics and Econometrics, 2009 Vol.1 No.2, pp.148 - 170

Published online: 17 Nov 2009 *

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